Amazon Said to Plan TV Set-Top Box for Streaming Video

By Brad Stone -
Apr 24, 2013

Amazon.com Inc. (AMZN), the world’s
largest online retailer, plans to release a television set-top
box that would stream video over the Internet into customers’
homes, people with knowledge of the matter said.

The device, due later this year, will connect to
televisions, said the people, who asked not to be identified
because they’re not authorized to speak publicly about it. It
will also provide access to Amazon’s expanding video services,
which include the Amazon Video on Demand store.

Amazon would move into closer competition with Apple Inc. (AAPL),
which sells its own set-top box called Apple TV. The device
would also compete with products from Roku Inc. and Boxee Inc.,
as well as gaming consoles from Microsoft Corp. and Sony Corp.
that deliver video programming. Amazon Chief Executive Officer
Jeff Bezos is pushing the company into a broadening array of
hardware, including tablets, electronic readers and a planned
smartphone.

“It would certainly make some sense,” said Jason Krikorian, a general partner at venture-capital firm DCM, and
the former co-founder of Sling Media, who does not have
knowledge of Amazon’s plans. “They have a ton of content, an
existing billing relationship with millions of users.”

Many competing set-top boxes already give access to
Amazon’s video catalog. By building its own device, Seattle-
based Amazon can put its content more directly in center of
consumers’ living rooms, while giving developers another reason
to create applications for Amazon’s digital ecosystem.

A representative of Amazon declined to comment.

Lab126 Skunkworks

The set-top box is being developed by Amazon’s Lab126
division, based in Cupertino, California -- the city that’s also
home to Apple. Lab126 has toyed with building connected
television devices for several years, the people familiar with
the effort said.

Amazon could also draw on its marketplace of downloadable
apps, as well as its “reputation for solid hardware products
and a terrific channel through which to promote the product,”
Krikorian said.

Plans for pricing couldn’t be determined. Amazon’s typical
strategy is to sell hardware at competitive prices, sometimes at
a loss, with the intent of making up for discounts through sales
of content, including books and movies. Amazon could also use
the set-top box to promote its online store.

Amazon rose less than 1 percent to $269.52 as of 1:08 p.m.
in New York. It has climbed 7.2 percent this year through
yesterday, compared with a 24 percent decline for Apple.

Video Executives

The project is being run by Malachy Moynihan, a former vice
president at Cisco Systems Inc. who worked on the networking
giant’s various consumer video initiatives. In the late 1980s
and 1990s, Moynihan spent nine years at Apple. Among the other
hardware engineers working at Lab126 with experience making set-
top boxes is Andy Goodman, formerly a top engineer at TiVo Inc.
and Vudu, which is now owned by Wal-Mart Stores Inc., and Chris
Coley, a former hardware architect at ReplayTV, one of Silicon
Valley’s first DVR companies.

Amazon’s set-top box would include programming from the
company’s on-demand video service, which includes newer films
and TV shows, and the instant-video service provided free to
members of the Prime two-day shipping service.

Amazon has been rapidly expanding its efforts in the video
arena. Earlier this week it introduced several television
pilots, which it financed, and it is now monitoring customer
feedback to decide which ones to produce as full series. The
company has also paid to secure exclusive streaming rights to
hit shows such as “Downton Abbey.”

Netflix, Hulu

While the device will compete with other set-top boxes, it
could coexist with rival streaming services, such as Netflix
Inc. (NFLX), Hulu LLC and Google Inc.’s YouTube. Owners of Amazon’s
Kindle Fire line of tablets can already access those services.
Still, Amazon’s own video and music services will probably be
more prominently integrated into the device.

Another looming question: the product’s name. While the
people familiar with the project were not sure what it will
ultimately be called, Amazon’s five-year history in the hardware
business suggests an obvious choice: Kindle TV.